Understanding the Job of a Market Category

Jan 11, 2024

Market Category is important, but it is not the core of our positioning.

Many companies think that positioning starts with choosing a market category because they believe it’s the most important part. In my positioning work with clients, teams sometimes become so obsessed with market categories that it’s hard to get them to think about anything else. In my opinion, market category is a key component of positioning, but it’s not the most important one, nor is it a good starting point for developing great positioning.

I think in marketing, we do a lot of surface-level talking about market categories. Here’s my thinking about what I believe the job of a market category is and what it can and cannot do for your positioning and your business.

Our Market Category acts like the opening scene of a movie.

I like to think of market category as a way of setting context for a product. Context is how we make sense of the world, especially when it comes to new things we have never encountered before. My favorite analogy for helping folks think about market categories is that they serve much the same purpose as the opening scene of a movie. The job of a movie’s opening scene is to help the audience answer the big questions - Where are we? What time period is this? Who are these people? How should I be feeling? Until we get these big questions answered, we will have a hard time interpreting the smaller details. The opening scene sets the context. It answers these big questions so that we can settle in and pay attention to the rest of the details of the story.

My favorite modern movie opening scene as a positioning example is from Baby Driver (go watch it, but come back - I’m making a point here!). We immediately know where we are (present-day, in front of the First Bank of Atlanta, about to get robbed), we’re introduced to the vibe of the movie and how music is used (the action - opening car doors, opening the trunk, the gunfire, etc. - happens on beat with the music). We get an introduction to the bad guys - the leader up front, the intense one in the back, and the woman’s smirk tells us she loves robbing banks. We also get introduced to our main character, Baby, who is young, quirky, and really into music. He seems in over his head (notice the Risky Business sunglasses bit) but has freakishly amazing driving skills. At the end of the opening scene, we are only five minutes into the movie, but we know a LOT. Now, we can settle in and pay attention to the details of the story.

For technology products, we can’t always use music and facial expressions to help us set a scene. Still, we have other tools to set the context for a product, including pricing, the capabilities and value we choose to highlight, the customers we choose to talk about, branding components, and, of course, our choice of market category.

A good market category puts our differentiated value into context so it’s easier to understand

Market category is a way of setting the context for a product. It’s a starting point for a prospect who doesn’t know much about what we do. It helps point a prospect toward our differentiated value and, importantly, away from things we don’t deliver. It sets off a very powerful set of assumptions in the minds of customers about what our product is all about.

For example, suppose I tell you my market category, and I don’t tell you anything else about it. I tell you my product is a CRM (Customer Relationship Management) tool. Who’s my competition? You would likely say Salesforce - they are the leader in that market. You would make other assumptions too. You would likely assume my product does basic account management, deal tracking, and other “table stakes” CRM functionality. You would assume the product is used by the sales team and purchased by sales management. You might make an assumption about pricing - Salesforce is the leader in the space, so this product couldn’t cost more than that!

If we do a good job and select a market category that sets off a set of assumptions in the minds of prospects, and those assumptions are TRUE - that’s great! We have saved marketing and sales a lot of work. We can assume our prospects are comparing us to Salesforce. We don’t have to talk about basic CRM capabilities, for example - it’s assumed we have that!

Unfortunately, it works the same way if we do a bad job of selecting a market category. If our category sets off a set of assumptions in the minds of prospects that are NOT true, now your marketing and sales teams will have to work to unwind the incorrect assumptions prospects have about your product straight out of the gate. For example, what if my CRM is actually for marketing teams that don’t have a sales team at all? All of your assumptions about my product would be incorrect. In that case, positioning the product as a CRM would make it harder to figure out what the product is all about vs easier. Maybe it would make more sense to position it as a marketing automation tool or a prospect tracker for marketers.

How do we know we have chosen a good market category?

If we understand this, we might think it’s so important to choose the right market category that we should start there and form our positioning around it. Many teams I have worked with have attempted to do exactly that, and the results range from sorta bad to absolute disaster. I’ve worked with many teams that have spent years struggling to position themselves in their selected market category (often a completely new category of their own creation), only to see sales slow down to a trickle. When we worked through their positioning, it was easy to see why - the category was never a good fit for their offerings in the first place and left prospects hopelessly confused. They made the category decision first, based on nothing more than gut feel and hope, rather than starting with what they needed the market category to do.

We can’t start with the market category because we need a way to evaluate whether the category has the potential to do its job well. We want a market category that triggers the correct assumptions in prospects' minds about our value. Put another way, we need our market category to effectively point our best-fit prospects toward our differentiated value. If we don’t have a clear idea of what our differentiated value is and who our best-fit customers are, it will be impossible for us to evaluate whether or not a market category is any good. We need to determine what value we can deliver that the other alternative cannot and which customers care the most about that value. Once we know that, we can determine which market category would work the best to contextualize our value for our best-fit prospects.

What is the job of a market category?

The job of a market category is to take a prospect that doesn’t know that much about your product and point them in the direction of your differentiated value. That’s it. It doesn’t replace your messaging or your sales pitch. Companies will rarely use their market category in isolation in any of their marketing and sales materials. It’s merely a starting point. It does not fully communicate our differentiated value or answer the question - “Why pick us over the alternatives?” You will still need messaging, a sales pitch, and stories that help prospects understand your point of view about that market category.

Market Category is an important element of Positioning but not the MOST important one.

If we look at the component pieces of positioning, “Differentiated Value” defines why a buyer should choose us, and “Best-Fit Customer” defines who those buyers are. Market Category is the context that points those buyers toward our value. Everything we do downstream from positioning - creating messaging, building a sales pitch deck, creating other marketing and sales materials - is all oriented around helping our best-fit customers understand our value. Market Category is important, but I would argue that we can’t do a good job of selecting a Market Category without deeply understanding our value and target customers. Those two things are absolutely critical.

Attempting to do positioning by starting with a market category is the tail wagging the dog. Our market category has a specific job to do - and that job is to help our best-fit prospects understand our differentiated value. We need to work through the other positioning components first, before we can assess which market category does that job best.

Even aspiring category creators shouldn’t start with a market category.

Some companies believe they can only be successful if they create a new market category, so they want to start with that. The data tells that that simply isn’t true - most of the technology products you know and love (Google search, Facebook, Apple’s iPhone, Salesforce CRM, the list is very, very long) were initially positioned in underserved subsegments of existing market categories until they overthrew the incumbent to become the category leaders they are today. In the positioning work I’ve done with clients, about 10% are best positioned in newly created market categories because no existing category does a good job of contextualizing their value. However, even when that is the case, we still need to center on our differentiated value, not the category itself and we need a tight definition of that value to do a good job defining the Market Category. I’ve found that working through a positioning exercise can help teams understand when and why a new category is required and what concepts they should anchor the category on.

We need to understand the other components of Positioning first before we get to the market category.

In the work I do with clients, we work through positioning in a very specific order. We start with competitive alternatives (what would your customers do if you didn’t exist), then list the capabilities you have that are distinct from the alternatives, and then we translate those distinct capabilities into differentiated value. Doing it in that order ensures we don’t fall into the trap of listing value that is common across any solution in the market. Once we understand our differentiated value, we can then look at what the characteristics of a target account are that make them really care a lot about the value that we deliver. Once we have a good handle on how we define these best-fit customers, THEN we can start to look at which market category helps to point our best-fit prospects in the direction of our differentiated value - whether that is an existing market category or a category that we will be forced to create.

What do you think? Do you think your team is a bit too focused on market category and not focused enough on value to customers? Sound off in the comments!

Positioning with April Dunford

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